Greek Leaders Learn A Lesson From The EU & ECB – What To Expect Today?

What do traders expect from today’s meeting between the Eurogroup Ministers and Greek officials?

The question is nothing much. It is obvious now that Greece’s intention is not to leave the Euro as their rhetoric continues to soften their rhetoric. This weekend’s comments from Prime Minister Alexis Tsipras shows a distinct shift in their attitude.  Greece’s new Prime Minister Alexis Tsipras edged closer to securing a massive revamp of its huge bailout after making his case to skeptical EU leaders.

Tsipras says he’s “confident” about progress in renegotiating Greece’s debt at a crucial Eurozone meeting. The left-wing government of debt-hit Greece wants to end a punishing austerity program agreed to by their center-right predecessors in return for international bailout funds. “We don’t need money, we need time to realize our reform plans,” Mr Tsipras was quoted as saying by German news weekly Stern on Sunday. “I promise you Greece will be a different country in six months.”

Monday’s meeting of Eurozone finance ministers in Brussels will be a high-stakes gamble that could see Greece forced out of the Eurozone if a deal is not found by the end of the month.

Reuters said that Greece and its international creditors started talks on Friday on reforms needed to keep the country financed, increasing the possibility of a interim compromise deal between the euro zone and Athens at a ministerial meeting on Monday. The talks between eurozone finance ministers and Greece on Monday is key, because they are the last moment for the Greek government to ask for a technical extension of the current bailout program, which runs out on Feb 28. 

Greece needs such an extension to ensure continued official financing at a time when market borrowing is too expensive for Athens and to be eligible for negotiations on more time to repay the euro zone loans already received. Greek started the last week with a claim for reparations from Germany over the second World War as he campaigned to assert control over his country’s crippled finances. His administration ended the week in bailout talks with the European Commission, the European Central Bank and the International Monetary Fund, the very troika bodies he had promised to banish forever from Athens.

At issue right now is a plan embracing a revision of some policy elements in the program; a possible reduction in the budget surplus Greece is required to achieve before debt servicing costs; a renewed effort to boost tax collection and stamp out corruption; and the possible extension in the maturity of bailout loans. 

The European Central Bank’s control over emergency funding for banks gives it the power to prod countries into the kind of aid-and-reform program that Greece is desperate to escape. The ECB is hesitant to pull the plug on Greece’s banks, a scenario that would almost certainly lead to the country’s exit from the euro zone. But if Athens refuses to extend the existing program or sign up to a new one it may have little choice. Time is short, and the ECB has Greece on a tight leash.